Shenzhen Releases Regulations to Oversee Regional Green Finance

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Shenzhen Releases Regulations to Oversee Regional Green Finance

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The Shenzhen Municipal People’s Government has released the Mainland’s first set of regulations to govern local green finance development, which will come into effect on March 1, 2021, as reported by Sina Finance on November 9. Under the rules, listed financial companies that registered in Shenzhen, green bond issuers, and other financial institutions that are entitled to preferential green finance policies shall disclose environment-related information in a mandatory manner beginning on January 1, 2022. Additionally, Shenzhen-located banks or branches with assets worth over RMB50bn and qualified institutional investors, including mutual fund managers with more than RMB10bn asset under management (AUM) and private fund managers with at least RMB5bn AUM, also must report environmental data in January 2023. The mandatory disclosure covers information regarding the environmental impact of enterprises, projects, or assets that receive investments from the aforementioned institutions.

Chinese financial watchdogs have been continuing efforts to improve and standardize environmental information reporting of listed companies to boost the domestic green finance industry. Tightened information disclosure is also important to eliminate greenwashing in the finance sector. Greenwashing is the practice of companies and organizations marketing seemingly green activities to receive capital support or to make the public believe that such companies are environmentally friendly, when in fact they are not. In March 2020, the General Offices of the CPC Central Committee and State Council published guidelines on forming a modern environmental governance system, which focused on improving mandatory reporting on environmental protection practices of public companies and bond issuers. More recently, on October 24, the Securities and Futures Commission (SFC) of Hong Kong started looking for public comments on a plan, which will require fund managers to consider climate-related risks in investment management and make relevant disclosures. According to the authority, the plan aims to address the greenwashing issue amid increasing demand from investors to incorporate climate risks into their decision-making.